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Ray Dalio: "Principles: Life and Work" | Talks at Google

Ray Dalio:
so thank you all for joining us I'd like to introduce you to Ray

Dalio

he's the founder of Bridgewater associates he founded it in 1975 and is one of the most successful hedge funds in history so let's give ray a nice

Google

welcome I'm in a stage in my

life

while I'm entering what I call the third stage of my

life

I think of

life

as being existing in three big stages the first is that you you know you're learning from others you're dependent on others you're a kid second stage of your

life

is then you're

work

ing others are dependent on you and you're trying to be successful then after you get to the later stage in

life

third stage of your

life

is others are successful without you and that you're free and according to Joseph Campbell free to live and free to die okay so that you have that element of freedom and so I'm at a stage in my

life

where you know I started bridgewater out of a two-bedroom apartment in 1975 and I've brought it to where it is now according to Fortune it's the fifth most important private company in the United States it's been successful it's been good and that my objective at this particular stage is to help others be successful without me I learned along the way certain

principles

not every time I would make a decision I would write down the reasons I would make that decision and I put them out I debated them and I developed these

principles

so think about

principles

as just being...
ray dalio principles life and work talks at google
these reasons for making a decision if you're in this this situation how do you deal with it it was also very important to me to operate in a very unusual way that seemed very sensible to me and it's an idea matter meritocratic way so I want to describe Bridgewater as being an idea meritocracy in other words a real idea of meritocracy which I'll explain and show to you so real idea meritocracy in which the goals are meaningful

work

and meaningful relationships meaningful

work

I mean you're on a mission that you feel you're on a mission together to do those great things and meaningful relationships meaning that you care about each other it's part of a community and to be on that mission together and that was really good great in terms of our success but it was meaningful

work

and meaningful relationships through radical truthfulness and radical transparency that means literally people saying anything that they feel that they want to say in terms of being polite of course but but sharing what they really believe is true and

work

ing themselves through to have an idea meritocratic way and to literally record everything for everybody to hear so I mean literally they're a combination of videos and tapes of all meetings that happen so that nothing is hidden because you can't have a real idea of meritocracy if you can't see things yourself and so it's a very unusual place and it was the really the basis of our success and I want to explain that...
ray dalio principles life and work talks at google
way of operating to you because this idea meritocratic way in which there's meaningful

work

and meaningful relationships through radical truthfulness and radical transparency so that you could have thoughtful disagreement and have ways of getting past that disagreement to then move on like a legal system that has been the key to our success so that's what I want to try to convey to you and I'm just gonna take a few minutes to try to go through a few slides to give you a sense of this you know I wanted big audacious goals I wish big audacious goals for you go after your goals and on your way to your goals you're going to encounter your problems and your failures right that's going to happen otherwise you just go straight to your goals no that's the learning process you can your failures failures is part of learning process from the failures what I found was great is I I started to think of failures as lessons I started to think of them as puzzles rather than develop emotional reactions to those failures I sort of think pain plus quality reflection would make give me progress so I started to think of the almost the failures like puzzles that if I could study the puzzles the puzzles was what would I do differently in the future that wouldn't produce that problem again when it happened so and then I would reflect well what was the that that would be my

principles

what would I do differently in the future if I solved that puzzle I would get a gem and...
ray dalio principles life and work talks at google
the gem was principle a principle to handle it better in the future because failure is a learning process it's an essential part of the learning process if you can realize that and you write down those

principles

write them down it's been fantastic so we learn those

principles

and then it would help me improve and then I would go on to more audacious goals and I look at evolution personal evolution almost every evolution evolution of a company and volution of everything as being this constant looping process that I sort of think of as this five-step process right in other words to be successful you have to you have to do five things you have to first you have to know what your goals are and go after those goals be clear on your goals and you will encounter problems on the way to those goals those are you be your barriers okay they're your tests now don't just emotionally complain think about them as your problems you have to diagnose those problems to the root cause to get at the root cause and that root cause might be yourself what you're doing wrong or what somebody else is doing wrong so you can't be personalize it you have to really look at it so that you make those changes and when you get at that root cause only by knowing that root cause can then you design a way to get around that group cause like if you're not good at something yourself it's okay if you find somebody else who's good at the things that you're not good at because...
nobody can be good at everything right so but you have to do that you just can't keep banging yourself in the wall so you have to design something that's practical to get around with it and then you have to follow through and do it a lot of people come up with designs but you have to do the thing that's necessary and by trying that thing that's necessary again you will find out are you getting to your goals or you'll cop or encounter your next set of problems and so on and that I believe is the first personal evolutionary process that has helped me those rules that I was able to write down and that you can get in these this book

principles

Oates's why I'm passing them along though that those rules we were actually able to then to put into algorithms and build decision-making processes that replicate the brain we'll get into that in a minute okay so in order in order to be successful in the markets one has to be an independent thinker in order to be an entrepreneur one has to be an independent thinker and bet against the consensus and be right because the consensus in the markets is built into the price whatever that anybody thinks gets it into the price so you have to think you have to bet against the consensus and you're gonna be wrong a fair amount of times about betting against and consensus but in any case you need to be an independent thinker and for an entrepreneur you need to be an independent thinker because that you're...
inventing new stuff you're doing something and you don't don't know if you're right so in order for me to be successful I needed to have a bunch of independent thinkers in order to have them have be effective okay well now how are you gonna get this bunch of independent thinkers to agree on anything okay I had to have an idea meritocracy in other words I had to have a system that literally systematically allows for thoughtful disagreement so that these idea meritocratic people could then get at the right answer because that's fantastic if you can have that thoughtful disagreement to get at the right answer it's very powerful by having that and then systemising it principle systems a system for having thoughtful disagreement for an idea meritocracy we could produce greater amounts of successes we also produced failures but we would look at that way produce our learnings and that would produced as a result happy employees who really believe in this idea meritocratic thing and owned the company intellectually and otherwise owned the company and we had happy employees and then it became easier to attract those types of people those types of people who believe that you know everybody has the right to make sense of things and that there's a power and thoughtful disagreement and that allowed us to attract more people and that was the basis of going from the two-bedroom apartment to Bridgewater now so we'd have about now we have about 1,500 people and...
that's and that's how it

work

s as a 90 meritocratic meritocracy and I want to pass that along to you and I want to say okay so what is an idea meritocracy you could have your own versions of this you pick what is fine to you but three different things are necessary for an idea meritocracy first you everybody has to put their honest thoughts on the table to see now I watch this and I think it's so many organizations so many people they all keep it bottled up in their heads right you know and they're critical behind the scenes and that's bad so can you put your honest thoughts on the table with other people's honest thoughts so that you understand what people are thinking okay it makes everything first of all a lot more efficient right it's terribly inefficient when everybody doesn't know what the other person is thinking and then also it doesn't allow ownership it can't be an idea meritocracy if you just don't

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it through everybody's talking behind the scenes we we don't allow talking behind the scenes but anybody can challenge anything at any time okay then you have to understand the art of thoughtful disagreement okay thoughtful disagreement so many people react badly to disagreement you have to change the modus operandi and start your thinking it should be curiosity how do you know who's right how do you know who's wrong okay it should prompt curiosity not anger it tends to produce some extent anger because...
it's like a barbaric animal behavior that what happens is the amygdala part of us has this flight or flight thing and then it's viewed as an attack you know and you have to that's not good so there are protocols that we have that I won't go into now that I don't have time but they're laid out in the book of how do you have the art of thoughtful disagreement to raise the probabilities because collectively you're going if you have an idea meritocracy and you know how to do this well collectively you're going to make much better decisions than and individually if you just they're stuck with the information that's in your head and your opinions that that's that's terrible I believe that one of the greatest tragedies of mankind such a easy thing to fix is the people who are stuck with wrong opinions in their heads that they don't put out there in stress tests and say and raise their probabilities of being right so they art of thoughtful disagreement you have to understand the other disagreement that brings in better thinking than you individually has and has a probability of moving you to a better answer than you would have individually that requires a skill and so then you have the disagreement well your honor that collective decision making is very powerful it's done well but you might still have a disagreement after those things you might come up then you have to have agreed-upon ways of getting past your disagreement if...
you have your disagreements that are annoying at you and so on it's like a law case a legal case okay you go in you have a trial you do it you get it but you believe that the decision-making system is fair and because you believe it's fair and you've had that opportunity that you can make your that you say now we can get past the disagreement and move on rather than being stuck with it so those are the three things that an idea meritocracy has to have you know and so if you think you want an idea meritocracy you have to think about those three things okay so this is the thing meaningful relationships and meaningful

work

together have produced this success because and then this radical truthfulness and radical transparency you know produces an idea meritocracy that's it okay the other thing is in order to have an idea meritocracy and in order to have great personal development here when you know what someone is like you know what you can expect from them okay can you talk about what people are like can you deal with really getting at what people are like do you know what you're like or are you gonna hide those things and not talk about those things okay the people who want to come into this environment would like to honestly know what their strengths and weaknesses are and

work

on those so that they can produce better teams the people have some weaknesses can

work

with people have corresponding strengths okay and also know about themselves and also be very...
straightforward then I can hand you that responsibility that but I can't hand you this responsibility because you appear to have these weaknesses how do you get objectively at the question of whether you have those weaknesses or those strengths can we have do that objectively that is really great so this is an important element that has been fantastic for us and I'll give you a sense so this is just making the point that you know a job qualities needed then what somebody is like in the goal is to eliminate that so I'm just going to give you so now I use technology and algorithms I started you know 25 years ago - and we do have done it - and a great enormous degree use algorithms to take

principles

and put them in making decision-making systems all of our investment decision-making is made by replicating our thinking and actually putting them in algorithms and taking in data and we do the same thing for about half of our management processes and I do believe that we're on the path that we will have algorithmic idea meritocratic decision-making done by algorithms that can see everything and that can make better decisions than individuals stuck in their heads and because you can specify the algorithm so everybody could see the algorithms everybody could see the criteria and they can evaluate the merit of the criteria but to just give you a little sense of that what I want to do is just show you a little clip of one of the tools that we use and we'll give you...
a flavor of what we're doing okay so who can hit the clip in order to give you a glimmer into what this looks like I'd like to take you into a meeting and introduce you to a tool of ours called the dot collector that helps us do this a week after the u.s. election our research team held a meeting to discuss what a trump presidency would mean for the US economy naturally people have different opinions on the matter and how we were approaching the discussion the dot collector collects these views it has a list of a few dozen attributes so whenever somebody thinks something about another person's thinking it's easy for them to convey their assessment they simply note that attribute and provider rating from 1 to 10 for example as the meeting began a researcher named Jen rated me of three in other words badly for not showing a good balance of open-mindedness and assertiveness as the meeting transpired Jen's assessments of people added up like this others in the room have different opinions that's normal different people are always going to have different opinions and who knows who's right let's look at just what people thought about how I was doing some people thought I did well others poorly with each of these views we can explore the thinking behind the numbers here's what Jen and Larry said note that everyone gets to express their thinking including their critical thinking regardless of their position in the company Jen who's 24 years old...
and right out of college can tell me the CEO that I'm approaching things terribly this tool helps people both express their opinions and then separate themselves from their opinions to see things from a higher level when Jen and others shift their attentions from inputting their own opinions to looking down on the whole screen their perspective changes they see their own opinions as just one of many and naturally start asking themselves how do I know my opinion is right that shift in perspective is like going from seeing in one dimension to seeing in multiple dimensions and it shifts the conversation from arguing over our opinions to figuring out objective criteria for determining which opinions are best behind the dot collector is a computer that is watching and watches what all these people are thinking and it correlates that with how they think and it communicates advice back to each of them based on that then it draws the data from all the meetings to create a pointillist painting of what people are like and how they think and it does that guided by algorithms knowing what people are like helps to match them better with their jobs for example a creative thinker who is unreliable might be matched up with someone who's reliable but not creative knowing what people are like also allows us to decide what responsibilities to give them and to weigh our decisions based on people's merits we call it their believability here's an example of a vote that we took...
where the majority of people felt one way but when we weighed the views based on people's merits the answer was completely different this process allows us to make decisions not based on democracy not based on autocracy but based on algorithms that take people's believability into consideration yeah we really do this and so that you could see believability waiting so let's imagine that you have data on everybody so that you know you just don't go walking in a room and everybody's got an opinion because and without actually thinking with some element of score who is more likely to have a better opinion because there's a certain dynamic you put I don't ten people in a room and you're gonna get one of two things you're either going to have idea merit you're gonna either have autocratic decision-making in other words everybody feeds their opinions and then the guy who is responsible for that then says okay here's my decision based on that that's more normal sometimes you'll go around the room and what does everybody think and then there's a notion to a consensus and that's not so good either what's best what I did because I really don't know that I have the right answer I really don't running the company there's I the reason I did this as it was out of need I want to triangulate about people who I believe are might have better thinking or and if three believable people believe one thing and I believe...
something else there's a good chance that I might be wrong and also what am I going to do how what about for them so I like to have these believability scores that it is accumulated by data and other people's thinking of who is better and worse at different things and then now you people can change those scores or take those into consideration and that's what believability weighted decision-making is because it helps the idea meritocracy okay so that's what we do we'll go to the question and answer the important thing here is to talk about idea meritocratic decision-making however we choose to do it and whatever tools we use to get at that is really subordinate important to the idea of how do you have that idea meritocratic decision-making I believe that what you're going to see is if you start to get to this principle decision-making an idea meritocratic decision-making what you're going to see is paths print the learning of

principles

for dealing with situations that themselves will be idea meritocratic so if you have a situation and you're going to okay

google

to find out what the facts are now you will increasingly be able to go to

google

and find out how you should handle certain things

principles

and and the like in that idea meritocratic way with believability weighted decision making and the alike so I want to throw that out there and then we'll have our conversation um I'd like to start with the other concept called the to use...
and how that affects our thinking process and also they can feedback can you talk about that mmm-hmm well the brain actually has a lot of parts in it that are the things that compete with each other to make decisions but the the two big use are the thoughtful you that is in our conscious mind and then the emotional you which is in our subconscious mind there are a lot of motivations that you probably don't even know that are subliminal that came from maybe your early childhood or your circumstances that are below the surface and they're at odds they struggle with each other so when you're like the issue of would you like to know your weaknesses would you like to know what other people really think about you okay intellectually you would like to know those things emotionally you might not look like to know those things and so when you're dealing with our environment and you say would you like to have this environment of radical truthfulness and radical transparency almost everybody intellectually says it and when they're going through it they say it and you see them also struggle with their emotional selves as they're going through it and till they readapt and when they start to readapt and they say knowing what's true is good and yeah now I know my weaknesses and I know what other people are thinking about me and I could approach what to do about it then they sort of make a transition to the other side so we have that that our to use that lead to...
struggles like you know disagreement you know disagreement and finding and emotionally difficult that's curiosity why shouldn't it be a joy but we have that emotional thing that we have to struggle so that's the to use and what are some tips that people can help themselves get through the to use issue to make them more resilient to feedback well they're you know they're number of they're number of things that are in the book first first I think let me answer it before I go to that particular one whenever there's whenever there's conflict I recommend that you go to a higher level one level up whenever you have a disagreement just go to go to one level up with the person that you're um the conflict with or even yourselves when you have a dilemma and look and come up with an agreement of how you should be with each other in other words let's say you and I have a disagreement okay rather than being caught in the anger of that disagreement to go above and you should say how do we disagree how should we disagree form a contract of how you should be with each other and make that a practical modus operandi that's what we do and then there's also then the ways we do it so the ways we do it are certain things first to know that decision making is a two-step process they're first taking in and then there's deciding the capacity to take in the other person's point of view the knowing noticing how your body is reacting noticing...
how you are reacting am I having my heart rate rise can I pause we have something like the two-minute rule said can I have two two minutes then that person has the two minutes to say what they want having those kinds of protocols there are a number in the rule explained in the book where this curiosity where there's not blocking you know somebody in a discussion will do a lot to block the taking it in so these protocols I won't go through them all but those protocols having those protocols in place that you practice are are fair I have created an app called a dispute resolver okay so when anybody has a dispute you push the button and there's a path in the dispute resolver it's explained in the appendix of the book all the tools are and you there and it describes procedurally what one does depending on the level of the dispute like a very common thing is if you and I have a dispute then when the simplest things to do is for you and I to agree mutually agree on a mediator yep so we agree on a media and move to some others might be matters of principle and almost progresses long leap like legal cases what's your evidence what's this in whom is the judge now when you have this dialogue and discussion about feedback and it might turn into a tense situation like with disagreement are there medians of exchange that you prioritize because I see some people who will go towards email but when you use email you miss tone and content and context as a...
generalization we want the person to find the medium of exchange that they're most comfortable with because there are pros and cons to each like some people in the moment feel that they're not as spontaneous in the moment or they may be more introverted and they think that they won't present themselves the best in a in a person one-on-one discussion so that they would ever by email to say listen I'd like to lay out my thoughts hear your thoughts by email and then have that opportunity to have the back and forth some people would like to do it other ways the important thing is that they just agree on what's most effective for them excellent now let's say an organization goes through a calamity and there's a trust issue in the organization how does the company go about rebuilding a trust within employees well again I think radical truthfulness and radical transparency is the means of doing it what what I did what my experience would be if you have radical transparency so literally every every crisis I was in every situation I was in I would have a camera in that discussion as we looked at the pros and cons of the issue so everybody could see that pros and the pros and cons of the discussion so you know there's no spin if you have a trust issue if it's hidden behind the scenes I think in with that radical transparency so everybody could see just imagine what it would be like here okay for whatever issue that you could see how people are making...
decisions literally that weighing the pros and cons and seeing how they are real and it could be anything from the top of the organization to just even somebody firing somebody else so you don't he was it done well that radical transparency and then coming out of it and writing

principles

as to why did you handle it that way and then putting those

principles

out so that everybody could debate that principle or look at that principle not an enormous time-consuming way but an effective way so and then having an idea meritocratic way where you look at that you say okay that decision was made that way maybe that's not the way I would do it but I now understand the thinking behind it because if you don't have that kind of thing then there's alienation if you don't have trust and you don't have an appreciate then increasingly you built an organization in which there's a we and them you know there's those people who are making the decisions and you don't really understand it and you just have to sort of go along with it and then that becomes a source of tension and then there are factions and all that and there's no resolution you have to have resolution and get past it so you know the radical truthfulness and the radical transparency brings trust and also means that bad stuff itself a bad stuff that happen because bad stuff happens in the dark it's true I you make it radically transparent and everybody could bring it up then everybody...
owns it radical transparency is a very effective tool in terms of building trust and putting things to

life

believe me none of this is perfect but it's certainly been miraculous for us excellent why do you think organizations aren't going towards radical transparency first of all I think that they inevitably will I mean you must know that it's so easy to collect data on everybody so everybody's gonna know what everybody's like and then the question is who's got the radical transparency and then what are you gonna do with the radical transparency you're gonna make what you're doing with it radically transparent okay so I think evolutionarily we're going to go to this you know a radical truthfulness and radical transparency because it's going to be tough to hide I think it's a control thing and at a time and can thing so it's a control thing means you're a decision maker and all these people have all these different points of view and how meritocratic is it to hear all this and we'll never resolve those things you know somebody just wants to sort of get on with their decision-making and I think that that's because they're still sort of in this what I believe will be an old-world mindset is that it is all in the head not rather than out of the head and in that notion of how do you make the best algorithmic decision-making so it's not in the head but we still have that it's in my head and I want to do what I...
want to do and I know better and how do I do that that's that's a big part of it and then the thinking of course about the time of how do you resolve it with all these people so that you have a real time efficient effective way of having an idea meritocracy those are the barriers and then there's this to you thing okay that emotional you thing okay those are the I would say the main barriers now you said what's important for the mission of Bridgewater is having meaningful relationships have you found that with this transparency you've been able to just I guess supercharge the relationships that you've had in the company it's a yeah and I'd just say we don't even have yes but we don't even have to go to the company level I'm just saying any group of individuals can decide whether they're going to be radically truthful and transparent and on the same mission thank you got five people together and they said we're going to be on that

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and that's largely where it started to because I start the company and I say how am I gonna be with each other so it has because that honesty and being on that mission is gonna bring people closer together it almost brings everybody closer together the hiding stuff in the absence of trust is bad and not only the absence of trust but the you can't have real ownership if you don't understand and don't have a say you know everybody and like I'm saying everybody has the right...
and obligation to make sense of things it's powerful and when you're in it together something much more magical happens than a paycheck and a job you know now when you've created your

principles

has there been processes where you said maybe this principle

work

ed at this point but now we need to read constantly because like you so I guess I want to describe it I think everything happens just just about everything happens over and over again so we instead look at things as individual things that are coming up so it's like we're in a snowstorm but if you just sort of said say what species of thing what species of encounter am I having and you write a principle for it and you write that then when the next one comes along ago again you see ah it's that species and you go to that principle and you look at it and everyone's slightly different and that leads to then the refinement of the

principles

and those differences right and then to do that transparently it's very powerful so yeah always and you realize of course that no principle is perfect no principle

work

s so those different gradations get more fleshed out become clear and that's what the that's what the book of

principles

is about it's a it's a bunch of these things and but you'll see how they will sort of evolve from this encounter and that accounter and you get refinement and I would urge you individually to do this it's one of the most wonderful things that's...
happened to me you know when something comes along some situation particularly a painful situation therefore might signal you don't want another one of those after you get past your pain or at the end of it record your pain and then think about

principles

and write them down how would you handle that type of situation write it down like a diary and when you accumulate those and share those that's very powerful I'm going to create an app in which I'm not only include we have a app which we hold coach which somebody says I'm in this situation what should I do and then they go to that coach and news in that the relevant

principles

come up but rather than just my

principles

I'm gonna make it that each successful person I'm gonna get you know I don't know my read pages Percival's XY z-- these

principles

for that situation and you have that there and then you have your own

principles

and you write it down so that when you're then in a situation you could look at that situation and you say what should I do going to those

principles

so because if you start to think of that in the principal way it's it's very helpful and they will refine that you now in the five-step process what's the of the five steps what do people have the most trouble with it's very interesting it really depends on how their brains

work

like there are some real big picture thinkers who you know have no problems with goals they know where they want to go but...
they have problems pushing through the results so there are some people in terms of diagnosing things to the root cause it's a challenge everybody has a problem at one of those steps and we see that by observing themselves as to which step they have a problem with they begin to understand how their brain

work

s it's not a problem though if they

work

collectively because whatever step they're having a problem with another person if they help them with that can really help them be effective at that step and that's really the key to success in

life

the key to success in

life

really is largely knowing what you're not good at and who can help you be good at those things so that you can lean on each other and be effective excellent in the book you mentioned Joseph Campbell's hero's journey and what type of impacted his

work

well my son gave it to me in 2014 when I saw way late in my journey but I was at a particular point in my journey where I was he gave to me and at the late stage the stage I'm now at he described returning the boon and returning the boon is the stage where you know you learned a lot and some people learn a lot and then they go to retirement and he was making the point that when you learn a lot you pass along that to others and he described it very vividly like I don't like public attention I don't like all of that and but has he described it as you know at that last stage how important it is to pass along what you learn he...
describes it as a difficult process and then when you do that so that others are successful with without you then you get to a stage where you're free to live in free to die because you don't have that obligation so he that that's where he caught me but if you read the book it's very interesting or even in my book I recounted in a few pages what the hero's journey is and you start to think about where am I on this path the hero's journey of just if you probably don't know the book hero of a Thousand Faces is the book Joseph Campbell what he did is he went through a history and myths and so on he says there's a certain type of person who has a taste for adventure and goes and through that through that and then has their battles and they and the wins and losses and then they then the mission becomes important and others become more important than themselves and they rise we can call that spirituality whatever that is but it is the basis of Star Wars it was the basis of anyway that his book was so it's that notion of that journey and it's a good book in my case I happen to read it at that particular spot but in anybody referring to it probably would find oh that's me there you know one of the biggest things was the abyss what is your abyss there will come a time that you are going to have a terrible situation and you're going to you know miserable and and how you reflect on that situation and and whether you have a metamorphosis a...
change a personal change me in my case happened in 1982 I was I was dead wrong and publicly dead wrong in the markets I know if I take the turn to tell you the story miss but okay you have the floor oh yeah so so I form Bridgewater 1975 and I had a you know small company and I analyzed and I had done calculations that American banks had lent to emerging countries a lot more money than those countries were going to be able to pay back and as a result we would have debt defaults and you know in a debt crisis and that was a very very very controversial point of view and and it turned out in that regard to be right Mexico defaulted in August 1982 and I thought we were going to have an economic collapse so because so I received a lot of attention I was asked to testify to Congress to explain the situation I went on Wall Street week which was a show of the time and I believed that we were going to have this economic collapse that was the exact bottom of the stock market exact bottom of start I could not have been more wrong not only was a more more wrong I lost money I lost money for me I lost money for my clients I was so broke that I had to borrow $4,000 for my dad to help to take care of my family it was a very very painful painful mistake but with reflection I would say was one of the best things that happened to me because it shifted my mindset from thinking I'm right to asking myself how do I know I'm right it gave me the humility that I to balance with my audacity it...
changed my approach I had a metamorphosis and so and each person is gonna have their own particular challenge that way and so what I'm saying is like in Joseph Campbell that abyss he describes that experience as here in the abyss and then do you have the metamorphosis and that metamorphosis is kind of like a humility and I'm worried that you might not get it right and how do you get the best triangulation that's motivated the idea of meritocracy bringing the most best independent thinkers to

work

for together so that's what that's like so anyway it's a good book excellent now we know a lot about your

principles

but as far as your father and your mother what type of

principles

do they teach you well my dad was a jazz musician he

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ed late at night he was a you know what I think about him he was a he was a strong capable man who I didn't see much of because he was playing a lot at night he would stay there but in later years we got closer and my mom you know loved me to bits you know I had you know memories and lots of memories of her so I was very fortunate in that I had a mother who loved me and a dad who had strong create character and creativity I mean I remember him you know in his 80s he would wouldn't let the snow stand in the way of driving he'd get out and shovel and he he went he went through World War two and and that kind of thing so ever met and he was a good man so I had those role models and I you know but that's what it...
was like thanks like and we talked about this earlier you know so many people don't have that benefit so I had all that that wonderful luxury of family and then I could go to a school it was a poet you know an average public school but I could get that a lot of people today don't have that and I think that's a big issue maybe we can transition there because we were talking about the psychological wealth of having a good family but then there's an economic component and you've been talking a lot about wealth inequality and populism and I thought maybe you could talk a little bit more about that here okay yeah look this is not an ideological I just want to be clear on just as I look at this I look at the practicality of it and so on and I'm dealing with economics and there's a mechanics that is as a result of this leading to two economies so they're hidden in the economic numbers the averages if you want to go on LinkedIn I wrote two pieces that you might find interesting on LinkedIn I divided the top 40% from the bottom 60% the majority of people and I looked at what is the economy of the majority of people like and if you were to look at that economy it is a terrible economy it has not grown it's the only population that has rising death rates from opiates from suicides the greatest change in and incomes it's a it's a bad economy and then there's this economy on the top and I divided it 60% I could have divided it 20 80 and the...
picture would be basically the same not only the in terms of the usefulness and so on the death rates rising all of this so it's a phenomenon and it's coming as a result of number of things technology is a big influence on that globalization in many ways is a big influence on that there are other things but anyway that exists if you have rich and poor together and living next to each other in the same community and they share a budget or they have to divide the pie and you have an economic downturn you're gonna have a conflict you're gonna have some form of conflict and and so populism is an extension of that isn't the first time this happened like I say everything's another one of those so in the study on populism which is also on LinkedIn if you're interested in reading it I looked at 14 populist cases and what is a classic iconic populist case like and what how do they

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and so you can read about those there was an iconic way of a populism so that dynamic of that disparity that problem which I think will be particularly important when we have the next economic downturn which I think probably yeah I'm almost certain will be before the next presidential election which means that I think there'll be a lot of polarity and I think it's a big issue so that's that's that's easier it's an issue of it's both an equitable an issue of equity and it's an issue of practicality that we have to deal with that I would say...
it should be a national initiative I would say led by the president or somebody in which you take the metrics I give metrics for that part of the population you could look at the metrics you and you if you have metrics so is it improving or is it worsening and what does it look like and then you have initiatives of how to be able to deal with it I think that economically we're not there are many things that could be done my wife is involved I live in Connecticut Connecticut has the highest per capita income in the country but it has it consists of rich people next to a lot of poor people and the averages exist and she

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s in the school system with what are called disengaged and disconnected youth a disengaged student is one who goes to school but really doesn't study for the test doesn't take tests fails is basically a failing student and a disconnected is one that doesn't go to school they don't even know where they are their own come to school 22 percent of the students in Connecticut are either disengaged or disconnected and and you look at the reasons for that and you look at the cost of what that means the cost of the there are programs and I won't get into this a lot but I've their programs that keep that help to keep the kids in schools and get them engaged that are needlessly not in there and yet if they graduate from high school the incarceration rates change the whole the crime rates change average cost of incarceration is between 85...
and 125 thousand dollars a year so you think of the cost of the society that is that it's happening that anyway there are those kinds of issues that I think have to be looked at essentially forthrightly that's got to be viewed as an issue there's got to be metrics and there's got to be processes in place for dealing with it yeah and that's our biggest economic issue right if you had like a magic wand and you could just write like three pieces of policy that could be passed by our Congress and you know approved by the Senate what would they be to solve this issue that's going on right now or do you believe it's well I finish again I believe an idea meritocratic decision I think that the the big issue like I was answering before the this other question before we started I think the biggest issue is how we deal with conflict and how we have and what are the

principles

that unite us and two big bring people together and that sense of okay

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ing it through and

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ing it out in a in a bit less selfish way so that we do healthy things you know I would if we deal with that the other particular issue like I said I would I would say there should be a national commission and to address what are the practical ways of dealing with such issues and also clear metrics so there's owning the results of those those changes yeah I after the post one period I mean we had this situation where the threat of World War two kind of United all Americans towards one...
cause and then after World War two it left to a social progress and I thought you know after 9/11 happened we we had a period of time where we came together but then it just collapsed what well one of the things let me just be clear one thing's excuse me if you look at history the history of populism is a is really a 1930s phenomenon and because that was you'll see in this piece that the wealth gap became largest 1/10 of 1% top 1/10 of 1% of our populations net worth is equal to the bottom 90% of the populations net worth so that that polarity you go back to the 1930s after the depression 1936 1937 and that led to the the Arab populism a lot of countries is left in this right and there's a sort of a conflict and a lot of countries chose a strong populist leader there's the strong leaders tend to be more confrontational tend to be more militaristic tend to be more nationalistic and that was that period in that period interestingly for democracy's chose to be autocratic became dictatorships chose to because to try to bring order to it and one of the common ways of gathering support is to have conflict with an enemy a foreign enemy so if ya 9/11 brings people together a common enemy brings people together along that that's a dangerous dynamic not just so when we're dealing with this I would say that it's more like we have to start to figure out how to deal with these common problems and try to deal with them you know more together that doesn't...
mean not being tough but it means you know being tough collectively I think I'm sorry I interrupted your question but I think I just wanted to emphasize that particular dynamic thanks yeah I see people more identifying for their political party or their own identity and not as much as we're kind of all in this together and it seems like we're kind of splintering here in the country it's this whole idea meritocratic thing like everybody throws out I think this I think that who gives a damn what you think I mean you know like huh just cuz thinking it doesn't make it true everything God because I think it it's true how do you resolve and get it what's true so it's about treating that contract where we can actually have the rules of how do we figure out what's true right and what to do about it Thanks now going to you you practice meditation what got you into meditation and what has it done for you The Beatles in 1969 next they went to they went to they went over there - they went to India and they meditated and they came back and sounded interesting and I started meditating in 96 and it has changed my

life

I would I would recommend I do Transcendental Meditation there all sorts of different types of meditation that I think it has changed my

life

it has been so powerful and it's probably the biggest gift that I can give anybody because it gives you I'll describe it I guess briefly it it connects your conscious mind with your...
subconscious mind and gives you an equanimity and a creativity that you ordinarily wouldn't have and the reason it does that mechanistically the way it does it is by having a mantra which is a word that means doesn't have a meaning it's a sound something like you know popular one would be own so you repeat that with your breath and that means that you get rid of your thoughts because you if you sit there and say I'm gonna try not to think you can't do that the thoughts just jump around and so to get rid of your thoughts you go to this mantra you repeat it over and over again and you're - when you pay attention to that you can't be thinking about something and then eventually the mantra disappears and you're in a subconscious state and when you're in that subconscious state you're you're not a conscious or unconscious you're in your subconscious state and that's where so it's relaxing and it's great and it gives you that equanimity but it also was where creativity comes from because you know you don't you don't muscle creativity you don't say I'm gonna

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there you get creative it's more like relaxation urine take a hot shower and this great idea comes to you so it bubbles up from your subconscious and so it enhances creativity and also I would say one of the best things that one can do is wrecking reconcile one's subconscious emotional self with one's intellectual self because if you can...
get those things aligned like if they

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in both ways you're gonna make better decisions so meditation has given me that kind of equanimity so I look at things mmm you know things I might not want to happen but I can approach them calmly and better so it's a big deal it's been a big deal for me has it helped you like analyze your emotions and the heat of like an argument oh yeah it helps you sort of go above yourself and your situation and you know you look at oh there's ray and there's the circumstances you know and there it is I know this thing happens this way and okay so what should be done right because if you're in it if you're in that Blizzard of things coming at you and you don't distinguish you know what type of thing is it what principle at that higher level how should I deal with it you know you're either gonna be in it or you're gonna be above it at more at that principle looking down at it and me and that level and it's much better to be at this level and then go in it and do then so it helps to bring you to that level have you ever found yourself I find myself those trap where I'll start meditating in and I'll start feeling much better and good and I'll say oh I don't need meditation anymore so I'll stop it's been so long for me that what happens is I feel good when I meditate I mean I could feel the difference I could I could sort of say I need to go meditate you know it's it's that...
refreshing me so it's always good always feels good yeah and that's been an advantage too when you're in the investment markets when there's so much noise going around you it does allow you to kind of just like you know family circumstances whatever it is we all have those things now since the book has come out whatever your thoughts been about the reactions to the book did you expect it the reactions ago the way they currently are well when I in 2010 I started get unwanted pop publicity of the attention and so I put out what our internal

principles

were ah and it was downloaded I was just a PDF file and it was downloaded three and a half million times then I got a lot of thank-yous I just put it out so to be understood and that problem me to leave the book I'm as I said you know half my including should be much more of a private person I put out this book and I then decided to go on social media to try to explain and interact with that and I've found it to be just wonderful what I'm finding is that I get funny it's having a big impact people are giving me you know thanks they're asking questions about it there it's it's it's having my desired impact of passing along that what I want it and I'm actually really enjoying the interactions on social media because it has a certain personal 'no sivan though it's impersonal so i'm you know i'm it sir it's good you know i feel good about it excellent now the apps...
you mentioned in the book when are you planning to release those it's a bomb I don't know six or nine months or something like that when they're all ready yeah yeah I would like to make them available for everybody excellent so we're gonna take audience questions now so if you have a question please go ahead and jump on the mic thank you so much for coming I really enjoyed your commentary about kind of secret of

life

and like finding your blind spots and when you talk about that it reminds me of like our own project oxygen and we talked a lot about like a lot of the same

principles

you have in terms of making decisions so how do you address that because I think one way that we address it is through like diverse I'm sorry address what finding your blind spots right so I think versus like using consensus as a way to measure believability and correctness so like how do you how do you guys balance those two things like having everyone having a consensus about an idea versus making sure you have a truly comprehensive range of opinions okay what you want is the smartest people most demonstrated believable people who will then disagree with each other and disagree with you about what the best path is you don't don't confuse consensus as everybody don't fail don't make the mistake of thinking that a lot of people have valuable opinions when they may not so you want to try to get to the what is the most valuable ones and you want to try to identify...
that so just like if you're going to yea medical problem and you think okay what should I do about my medical problem I you know you you don't want to ask you're just your friends you want to find out who the most believable people who will disagree with you and your and each other so you find them I gave the health case in there in the book about oh can you find this doctor you find that doc and you have though then who argue but one of the greatest ways of going through this type of triangulation is if you get really capable people who will argue with each other if you have the triangulation about what to do that'll probably give you a good indication okay well that might be the right thing to do and you'll learn and when you don't have triangulation that's where the interesting learning really becomes because if you hear two sides of an argument and you hear that debate you're going to and then ask your own questions and so on you begin to probe and you get a richer understanding of the subject matter than you ever could have and then you can come to that level and and and get that so I'm not arguing consensus decision-making I'm arguing believability weighted decision-making believability weighted decision-making means finding out in various objective ways in a particular community who would be more reliable and not and then go all into the room and have the believability weighted decision-making made that is a most effective...
approach so I don't know if I've answered your question I guess it's hard because subjectivity is and I think especially in this era of like social pressures like I actually think there's time three used right there's ru and then there's the the intellectual you and then there's time the pressures of like who should we be right and I guess it's hard when you have something subjective how do you know that it's something that's it's good well the first thing you have to do here is say do you want to find that out how are you going to create your idea meritocratic decision-making will you not compromise it because if you are convinced that you must operate this way you will find the solutions okay you're not probably almost everybody is not really on that path you just tell me it's hard ok if in the book I'm giving you structure of literally the things that we're doing ok there's a lot that you can go and just follow that because you said I can't compromise that but as long as you're gonna keep saying people say it's gonna be hard to behave idea meritocratic decision-making and have thoughtful disagreement and do these things believability weighted decision-making you won't have it and you'll be losing the competitive advantages so do you in your gut do you really need it do you really want it that's the most important question to answer I think sounds like you base that value of like wanting...
that truth and that's how you kind of come to a comfort of this believability metric is is dynamic and rigorous find it out figure it out and get it only goal next person all right thanks for your book I listen to it indeed audiobook version your voice is very fun ah one of the things about transparency that you talk about you argue that it's it's great to have it and you give just one exception that kind of itched me when I read it or listen to it which was sharing the compensation information from the employees and you you gave arguments why that wouldn't

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but I could use the arguments for transparency against that so I was wondering how you approach that okay first of all I you know like everybody to to their own then there's no you know like I either do it one way lots of questions you can do one way you could do it the other way and who knows exactly which way to do it and some times I say to myself if you wrestle about which way to do it so much in it and you struggle out it you probably could just flip a coin and decide because there's probably about equally well good so um the question at hand that's being referred is do I make everybody's individual trans compensation transparent and the reason I chose not to do that is because I found that and instead make very clear metrics and compensation levels by groups of people rather than putting the particular names to that so that everybody knows if you're doing this well with that...
generalization you know where the comp levels are for others and the reason I did that is because what I found myself in discussions are with is an evaluation of how that guy is doing with other people and that wasn't good you know in other words if all of a sudden you say you know Harry's earning this amount and now I have to describe my relationship and how I'm evaluating Harry and you're gonna now have to be the judge of how I'm evaluating Harry and all that type of stuff and that's kind of like not what you're gonna be able to be good at and nor should we do that where I can just in terms of compensation so I'm radically transparent the message that I end the conversation I want to have to hear is do you want to be radically transparent I don't want to make sure we don't get into one of those exactly how radically transparent cuz I don't really care too much about that do it either way is okay fine but how are you doing on the general concepts that I'm talking about okay what about the taping what about the those kinds of idea meritocratic those bigger issues because just like the question before okay how do we do it okay the big things you could we can wrestle around here and how you choose that individual thing I'm just describing how I chose it and why I just wanted to get your perspective on how you see your sort of organizational

principles

being adopted more widely and more different organizations in particular I...
think you had the relative luxury I would say of being able to being that the head of your organization be able to design the organization - you know operate according to those

principles

and effectively say you know if you don't like the way our

principles

work

in this organization you can kind of get lost right most of us are not in that position I was wondering you know do you see these

principles

being adopted more widely by people starting organizations that operate according to a set of

principles

from day one or do you have any advice on how those of us had more of the you know bottom level of the hierarchy can influence things at a more local you know

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group level very simply I think that those people who have the ability to control their organizations will consider this way of operating and and as you say the entrepreneurs the people who can do that will make their choices and I think we're I know that I'm having an effect on that and that's helping but that's good and then but people who don't then we'll start to think about the choices that they have as to where they

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right you can come to some environment that is more idea meritocratic and that one that's less idea marriage bracket and you got a lot of choices and so for the people of running organizations that's also something that's attractive to be able to drive that attract those people you have to know what your personal values are for me like I could not

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in...
a place in which I didn't have the opportunity to make sense of something if you know like those young people that criticize me that is the way it should be right in order to do that and I could not

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there it's for me it would be just like eating I couldn't do it all right so it's a personal choice if you feel that's important you will then gravitate to organizations that are more idea meritocratic and evolution will take its course both buck was in the entrepreneur because the individuals doing that I'm gonna take an online question real quick measurement is a big theme in your book how do you approach measuring teams whose

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has only second-order effects for example product aesthetics or who prevent bad things from happening so you don't have the counterfactuals okay the I want to say that in every one of these types of questions in which there's a particular dilemma or problem to solve it starts off with a mind or a group of minds thinking how do I solve that problem and doing that in an idea meritocratic way will give you the best answer to solving that problem and that is the most important thing so when I'm asked that question I might give my particular answer to the question but if I just gave my particular answer to the question I wouldn't convey the fact that you have the power individually to do that anyway so we all face that question how does the group and when you have a group and you take the second-order...
consequences and how do you know the decomposition of that okay well we can take a little test here absorber 'sons ideas and say okay now we have to figure out the best way to do that right and we can then gather those best ways and come up with that best way and that is the path now I'm not that's always the path if you understand that path you'll get to the best way you can get to and that's better than the ways that you have and then it becomes clearer so then in our particular case and I'm there is a series of evaluations that are very clear evaluations that people make the selves in a believability way about all dimensions of that so sometimes you can't measure sometimes you can measure results directly in other words you can measure somebody's batting average or something the equivalent and sometimes it needs a critique if we're asking does somebody sing better than somebody else there's no quantitative measure for that type of measure to see that but we could sort of say they're critiquing so such measures can happen at all levels and so you know we do that whatever the measurements that we come up with jointly and we think okay that's good measurements we can create metrics about it so qualitative things like like I said give the example populism well how do I measure the populism happens over and over again it's a qualitative thing but I could start to to create that process I found that by and large almost anything...
that I can think of I can express in an algorithm and in a rule the real question is how do you get to that good rule excellent thank you for your speaking with us today mr. Dahle Oh my name is Max and as I'm reading through this book which I'm thoroughly enjoying one question I keep coming back to is assessing the right timing right so because we don't operate in a vacuum coming up with a correct decision it's kind of one thing knowing to be radically truthful when giving feedback is one thing but how do you kind of assess the timing around giving that type of feedback or coming to those or executing those decisions you know well there's a there's a in a part chapter on decision-making there's a section on on timing actually okay so you might go to that section on timing and you know by and large but it but if I think you're also asking timing for the feedback right if you're asking time for timing for the feedback I would say it's can it's virtually continuous so that dot collector thing that I did that is giving everybody feedback from every and causing people to go above that is happening continuously in every moment of the day so people have a you know a 360 review continuously by a lot of people all the time right and so then they could step back and see the patterns they can look at it daily if they care to they and they can step back and see the bigger picture but it really very advantageous be by doing it continuously...
because you can connect it to the specific in other words a lot of times somebody will give you an evaluation and there's a million an annual review think about an annual review and how silly that is you know it I say okay now you're doing these things but you can't connect it to the specific by being able to connected all the time to the specific you know you could look back at that and have consultation with other people say I handled it this way what do you think and what and you can make that very tangible thank you I will question regarding the organization group or decision you mentioned that you want the disagreements to be discussed there I'm wondering if we spend too much time to persuade each other to in graduate this discriminate ake some time to reach the consensus in the group and miss the opportunity because we take too much time on the group consensus well there's a in the book there's a it if if left right you're talking about a risk that could exist it's expressed in the book on how to do that so that it doesn't do that so I and there's a you know there's a whole different way but but the important thing here is to explore quickly that notion of how you should make the decision because I find since everything happens over and over again on a particular case if you get down to a very clear way of how you make the decision effectively you'll be able to move past it I find that the inefficiency of organizations in...
which people argue endlessly and don't resolve it is that you know it is a terrible thing but you need the protocols you need the tools thank you I'm gonna take an online question real quick in your book you talk about making decisions as expected value calculations I find estimating payoff a lot easier than estimating probability of success given that people in general are bad estimating probabilities can you share some techniques you found to

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well well one of the things that I found valuable was if I write my decision rule out depending on the nature of the decision rule I can test how it would have

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ed in in the past and get some sense of it like in my investment decision rules I have I say they have to be timeless and universal so that means I test them from 1900 to the present digest them in all different countries and being able to specify them then allows me to get a sense of distribution of those types of probabilities some things are qualitative and it's different but I think that being aware of what I was describing in the book of how to think about that probability you know and sort helps helps you some things I you know it's just the mind has got to do and by triangulating with others right I think in my business you know I tend to think about that probability of decision making because I also have one of the benefits that I give very clear pay but paybacks you know I get graded every day essentially by the performance you know wait hi so...
having read the book I definitely agree that I've I agree with you that having

principles

is a good thing and they help you spot another one of those kind of situations but one thing that I didn't quite see covered in the book and I'm curious to hear about is at what point you decide that you've seen enough of these situations that they need a principal you know you could have a principle for every event that you see but then you might be overfitting there on the other hand you could wait for too many of these at which point in me you're probably over generalizing so I think what I think what happens my experience is it's just like a big thing comes along and do you start there okay now do you have that same then what you know okay now you're doing it and now another big thing comes along and you have one for that and if you do that then you'll find out whether you're getting two to small stuff but you probably won't have a problem with the to small stuff because you'll be struggling with the big stuff so I have I don't know you know I don't know I don't have any

principles

or in the book actually but every few hundred and and the reason was because I needed each one what you find is when you encounter something again then you start to is it a sub principle as another principle you get them organized but just the way I did it was you know I wrote them first by paper but then I started put dropping them in the BlackBerry...
when I was thinking and I would take that bits and pieces and I would collect them just your thoughts so just start collecting them make sure you do with the big ones and yeah you don't do with everything the size of the event thank you I think the process of decision-making in conflict resolution that you're talking about makes a lot of sense but I'm wondering if like a precondition for it is that the group like agrees on the general goal even if not how to do it and so that make that

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s well you know in bridgewater here at

Google

but in you know the public policy arena I'm not sure how that

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s this people represent different interest groups and they fundamentally have a different objective do you see any modifications that's required for that case I think you know all relationships the most the beginning is defining how you're going to be with each other clear rules yeah so Bridgewater's rules are different than

Google

's rules which are different from the government's rules then within any organization there are subgroups that can decide how we gonna behave with each other in a way that doesn't conflict with that so I would suspect that I don't know if I was president of the United States I would do have an idea meritocratic way that might be different than Donald Trump has who might be different than somebody else has so you within your group can decide okay do we want to be idea do we meritocratic can we talk about it...
these things in this way do we want to be transparent I'll make those types of decisions Thank You mr. thaw thanks for sharing my question pertains to the dot system that you mentioned right so you seem to have calculated the believable score for a person right all the time collecting information to help you with digital making process has there been your thought system being proven wrong where you calculate say someone's billables called to be very low when all the time he's been shown actually this person is very believable in this has that been Shawn well but I think the way I think of it more than like the way that you're sort of semi describing it if over time it's shown to be wrong quote wrong that must mean that you've evolved to the point where you believe that it's that that verdict is reliable so that the evolutionary system must have taken you to that spot the way I look at it is with sample size and with a lot of consensus or processes of coming up with those algorithms you have an evolutionary process more data more process to get at the definition of what is true and then it's that mechanism that's always constantly evaluating so that there are statistical ways of measuring the for a group as a whole how accurate is you might have something that might be something as simple as I would have test like I could test how you know math and that could be an objective measure in some areas you can't have that objectivity on some...
notion of creativity much but you'll have different measures so the point the point that I'm saying is that you're constantly never good enough and you're constantly evolving toward better and that is the best way by comparison to other ways which don't do that and is there a plan to open Soulstice so that the system can be shared and used by many organizations yes I'm going as I say I'm going to put that out and people so that it would open source so people can write their own algorithms and agree on together what the best algorithms are so we can make that evolution and as I say that probably I don't know how many months but maybe a year or something down the line thank you question for me well you're talking about the evolving process sometimes it can feel like a shot the gut over and over again what what do you do to like make yourself feel okay you know this is critical and my

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product but not critical as me as a human like there are some practices you use I think I think it is critical for you as a human meaning I think what you're like and knowing what and if you can get to the point where you say I really know what I'm like and I can now objectively deal with that to get anything I want that's fabulous power if you're if you're stuck with I'm it's a tragedy that I'm weak at this thing and where I don't want to know about it you won't get anything you want so I think I think it's...
it's a it's a personal thing as well as a business the

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thing things think that I mean is just doing that I've raised my head ask you to raise your hand do you think that that makes sense yes sir yes if you raise your hand okay cool thanks so much for coming I started reading the

principles

PDF that was released a couple years ago and happiness you know that you've released the book these ideas of about rattle radical transparency in the

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place have been I think coming more into the cultural zeitgeist really good your

principles

have made you a lot of money you've had a very successful career and that's awesome and so my question is when you think about your principle of how you've chosen to spend your time since you could have retired many years ago I'm curious how you thought about that and you know in terms of like right now I think you're using your time to promote these ideas of

principles

and decision making and radical transparency and I think you know hopefully will have a big effect in companies in the world and so I'm curious like wife chosen to do it now instead of earlier and in general like how you think about because you haven't needed to

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for a long time and so I'm wondering like why why you continue to chose to continue to

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and how do you think about Spanier yeah so first of all I'm not saying that anything that I'm doing is the right in answering your question is the right way to do things...
I'm just saying it is for me the way I'm answering your questions just how I do do that I've I played the market since I was 12 years old and I love it and I'll play them till I die I look the economics I just it's a game I love it okay but I saw a number of years ago if you step back and you look at yourself from a higher level and you take where your age where are you in this cycle as I became 60 and then and so on I recognize that it's my responsibility to transition well to make it you know your parents you think about your parents and you it's the same dynamic okay how do they transition well so that you're good without them it becomes almost an instinctual type of thing and these things come to you at these things in terms of retirement like I love my game I love my mission and so on but it becomes that there's actually a great pleasure in an Sesa tea to have others successful me I've gone in i fought battles I'm won battles I've accumulated it to go in and fight another battle and then I could go do that but that's not the most exciting necessary thing for me to do so the most exciting necessary thing for me to do is to pass those things on and that's what I have to recognize as my responsibility and just like I described it when he I'm on Joseph Campbell and I read this says it's totally right peace peace for your parents will come when you're good without them and everything is fine that's...
that's true so it becomes an instinctual type of thing for me I like retire like I'm just I don't never viewed it that way because anybody would

work

that way I just want to go have fun I just want have a blast I'm curious I want to do a lot of things I will be curious and do a lot of things as a million things to do I didn't want to also run my organization anymore I wanted to have that culture and pass it on and be successful without me and I was able to transition to others who will then run it I'm chairman and I'll still do the investment thing but whatever is a that excites you out of free choice and no longer obligation I don't want to be obligated obligated is also a sense of responsibility so I want to handle my responsibilities as well and then be free of them those are the things that motivated me oh thank you so much I'm gonna take an online question ray how do you address the tolerance paradox and organization while striving for radical transparency you may have some people who will argue views that undermine open discussion well I don't know what the views that undermine open discussion are what the merit is and find out what that what what how why would you not have that open discussion I don't understand that maybe it is at a time constraint is it some other thing I'd have to see what the impediment to the open discussion would be I'm interested in reading the book but I'm just curious what's your...
believability score I well I have I have the highest believability score the guys but it depends ion it depends on what we rate different levels of believability for what so I'm referring to the the general score okay that's not determined by me but anyway it is determined in other ways that would be objective but if I take a whole bunch of areas I have you know much worse believability scores there are many who have much higher believability scores in different areas so it has these something like 60 different believability scores high thanks for sharing all the

principles

that you've acquired over your

life

time so thank you for that my question is slightly off topic and I don't know if I'll have another opportunity to ask this question in person so I'm gonna ask you anyways I'm a big believer in value investment and my beliefs been kind of formed by reading of the books by Ben Graham and SETI Klarman but under the recently I read the book by David Swenson and he mentions that the biggest determinants in portfolio returns is not stock picking but capital allocation and I want to I'm wondering what's your views on that well because I think what he's referring to that when he distinguishes stock picking he's referring to within an asset class the individual securities chosen as distinct from the differences when he says capital he allocation he's referring to the different types of asset classes I'm presuming that that's...
what he's referring to in that way and that's correct in other words the average stock is 60% correlated with the average other stock you know so there's a high correlation of stocks they will go up and down together and because of that you're going to it almost past a certain point doesn't matter how many stocks are just a few I cover that by the way in the book in terms of the math of literally how if I take anything that 60% correlated and I put more than 10 in the marginal benefits of diversification or virtually nil so that you're gonna have the stock market or something like that and then some alpha is the deviation relative to that whereas if you have a cap an asset class different asset classes they'll behave very uncorrelated with that and so portfolio construction based on capital allocation as he calls it is very important in terms of saying what that that's really the key most important thing because of the nature of the correlations of those pieces to get that balance right thank you thanks for the book it's great what does Bridgewater's midterm 2-year economic outlook for the US I think that I think we're gonna have a lot of stimulation into a lot of profit growth a lot of stimulation into capacity constraints and that that's going to raise interest rates and then there's a sensitivity to those interest rate changes it's gonna put the Fed in a particularly difficult position other central banks around the...
world in a particularly difficult decision and so if and I think that probably as you get later in the year you're going to start to see the question of how does interest rates or Fed policy affect the markets as a general thing and and when that will become negative when that's a problem because we're coming in to the end of the cycle late in the cycle there's a cycle and there's capacity limitations and stimulation and as you go late into the cycle it's never the Fed never central banks never get it exactly right and that's why we have recessions we always have recessions you can't get a ramp plan away from them when that balancing act becomes difficult that balancing act will become increasingly difficult at the end of this year in the beginning part of it next year and it will be manifest probably in market behavior and then in terms of then the the downturn the economic recession because we always have them if you know probably maybe later part of that you know 2019 or something along those lines but I can't be you know it would be something like that Thanks thank you for coming I appreciate my pleasure clean presentation one question that I had was I know that the bridge waters been producing investment theses for well since the beginning and investment what the thesis is thesis yeah yeah Bowles yeah mm-hmm to what extent are you willing to and maybe this is a request rather than anything else is are you willing to open those up also...
possibly past ones and previous examples um I did a 30-minute video called how the economic machine

work

s which if you haven't seen people think it and so it exemplifies how I think it's going to be helpful and not harmful to bridge water for conveying economic

principles

and market

principles

in general we will not get into our exact algorithms that are going to you know that we would say would lessen our ability to do what we do well but they'll be you know I'm writing a book economic and investment

principles

which will you know I don't know it might be 18 months or so out there I'll look forward to it thank you well thank you Ray for joining us I think there were three you know your timeline I you're the boss do it offline but thank you very much for joining us who really appreciate it you wrote an excellent book and I hope everyone goes and grabs it gets phenomenal let's give ray you